What happened

Shares of Party City (NYSE:PRTY) were moving higher today, though there was no direct news out on the stock. Instead, a short squeeze seemed to be propelling the stock higher. The stock is heavily shorted with 41% of the float bet against, and shares closed up 9.2% today high on volume.

So what

Party City stock plunged in November as the company reported disappointing third-quarter earnings. It blamed soft Halloween results, and helium shortages, as balloons are a significant component of the company's business.

A Halloween display in a retail window

Image source: Getty Images.

However, since then shares have rebounded somewhat, gaining more than two thirds from a bottom following the report. The stock appears to offer deep value according to some metrics, as the stock trades at a P/E ratio of just 3.

That's a sign of how troubled the market seems to think the business is, but it's also an opportunity for the stock -- one management laid out at the ICR Conference, one of the largest consumer discretionary-focused investor events, earlier this week.

In that presentation, the company discussed initiatives designed to turn around performance, like redesigning and decluttering stores so that they're set up in a "race track" format like one might find at a department store, rather than like aisles in a grocery store. Management also intends to lower prices on competitive items like tableware and Halloween costumes, and separate balloon sales from the cash register in order to speed checkout lines.

Additionally, the omnichannel, or combining e-commerce with in-store services, presents a significant opportunity for the company as it envisions becoming a one-stop shop for party needs, including party planning services.

Now what

Party City is still profitable, but comparable sales have been declining slowly as management has been challenged by a helium shortage and a lack of evolution in the brand. However, the ICR presentation makes it clear that there are some simple improvements, especially in e-commerce and technology, that the company can make to improve its performance. It plans to test some of its new ideas at pilot stores over the coming years. Successful implementation could lift the stock higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.